I recently came across a video of Ron Paul talking in 1988 where he made a prediction of a coming depression in the next few years that never came to be. You can see his words here: http://www.youtube.com/watch?v=Gh5oKTY9PoY
My first thought is that the Federal Reserve paved over this corrected with inflation and prevented the bubble from bursting, but I wanted to see if anyone had any deeper thoughts on this situation as it was right around the time I was born. Has the Fed really been preventing a bubble from bursting ever since the late 80s?
I am really not qualified to comment, but my guess would be that he was actually right, but the fed was pretty succesful at prolonging the coming economic collapse until now. How could they have done this? Probably because the expanding credit was used for quite productive things that panned out better than malinvestments had previously done (mailinvestment rate competing with technological progress). At the end of the 90s the stage was set for the most unproductive bubble conceiveable, and we all know what happened after that, and how that bubble was continued through a housing bubble. It’s always hard to predict things, economics isn’t a science that can actually do that, and as austrians we’re actually being pretty sloppy when we try to predict things. We can explain the concepts of how markets work and how intervention affects the markets, but that’s about it. Sure, we can look at the intervention happening, but that does not account for all the uncertain progress of the market, intervention is only one factor.
thank you for the response. i suppose this creates another question. what happens if the money printed by the fed during an econmoc downturn actually goes to productive projects? so perhaps there was a good chance that the fed increase could have created an even bogfer bubble and this is what the austrians were banking on. so if the xureent fes practices put money in thw right places they could actually prevent a complete collapse? basically trying to speed up the correction process. but in most cases, money is invested in the wrong areas when crwdit is readily available. sorry for horrible amount of typos i wrote this from my phone.